HONG KONG–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Macau Insurance Company Limited (MIC) (Macau). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect MIC’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
MIC’s balance sheet strength continues to be supported by its risk-adjusted capitalisation, which remained at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s capital and surplus continued to grow organically in 2021, supported by positive operating results and full profit retention, as well as capital gains from the company’s investment assets. Although MIC’s strategic asset allocation reflects an appetite to invest in equity securities, which exposes its overall earnings to equity market volatilities, the downside risks are mitigated partially by the company’s significant level of surplus capital.
MIC continues to rank third in Macau’s non-life insurance market, with a market share of 10.4% in terms of gross premium written. The company’s underwriting portfolio remained moderately diversified with major lines of business in property, medical, employees’ compensation and motor. For fiscal year 2021, despite a reduced premium base, which led to a contraction in net underwriting profit, the overall net combined ratio remained at a healthy 89%. Over the near term, MIC’s top-line performance may continue to be affected by a number of challenges externally, such as the economic slowdown in Macau and near-term uncertainties in the local gaming industry. Nevertheless, AM Best expects the company to continue with its business plan to maintain underwriting profitability through expanding its more profitable business; tightening underwriting practices for unprofitable business; actively managing claims costs; enhancing digital capabilities; and improving operational efficiency.
Positive rating actions could occur if MIC demonstrates successful implementation of its business plan to achieve sustained improvement and stability in its operating performance, while maintaining a robust level of risk-adjusted capitalisation. Negative rating actions could occur if MIC’s operating performance experiences a material deterioration due to unfavourable investment results or a significantly weaker underwriting performance. Negative rating actions also could arise if MIC’s business profile exhibits a sustained diminishing trend that materially deviates from its indicated plans.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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